The Equifax breach affecting as many as 143 million U.S. consumers highlights the segmented legal landscape surrounding data security as well as the challenges of regulating it. News reports indicate that federal agencies, including the FTC, and a number of state Attorneys General either are or have been called to investigate Equifax and a number of class actions have already been filed.
Some commentators have suggested that the Equifax breach requires a regulatory response, but it is not clear that regulation would have prevented the breach.
While there is no overarching federal data security regulation, there are existing laws that regulate data security. For example, as a consumer reporting agency (CRA), Equifax already must comply with the Fair Credit Reporting Act (FCRA), which among other things, requires CRAs to protect consumer data. Specifically, the FCRA requires CRAs to maintain reasonable procedures to limit the furnishing of consumer reports to those without a permissible purpose.
In fact, the Federal Trade Commission (FTC) brought two actions against CRAs for failing to maintain adequate data security in violation of the FCRA. The FTC also enforces Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, and has brought more than 60 actions against companies for inadequate data security practices. In addition, the Consumer Financial Protection Bureau (CFPB) has supervisory authority over larger CRAs pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB assesses compliance with federal consumer financial laws and detects and assesses additional risks to consumers.
Breach notification laws enacted in 48 states, along with the District of Columbia, Guam, Puerto Rico, and Virgin Islands, also require companies to notify individuals of breaches involving their personally identifiable information (PII). Recently states have started to pass legislation establishing proactive cybersecurity practices for companies to follow, most notably the New York Department of Financial Services’ (NYDFS) Cybersecurity Requirements for Financial Services Companies, which took effect in March 2017. The NYDFS cybersecurity regulations bear a strong resemblance to the comprehensive data security compliance programs required by the FTC in its data security settlements. For example, both require:
- comprehensive risk assessment
- written policies and procedures
- designation of appropriate employees to coordinate and be accountable for security
- design and implementation of reasonable safeguards to control identified risks
- regular testing and monitoring of systems, networks and applications
- senior management engagement
- certification of compliance
The hallmarks of good data security, which is relevant for any entity that collects and uses sensitive PII, include, among others:
- data security audits
- incident response plans
- IT encryption protocols and access controls
- vendor management policies
- continual employee training
- rinse and repeat
The Equifax breach has certainly caught the attention of regulators, legislators and others. There is no silver bullet, one-size-fits-all, nor any one-and-done solution for data security; data security is constantly evolving.
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